Borosil Glass Works Indian Equities

Borosil Glass Works is in the business of supplying Borosilicate Glassware.

The product finds applications in the pharmaceutical industry (scientific instruments etc.) and consumer segments (e.g. microwave glass, kitchen table glassware, etc.). Management expects good growth in both segments as a result of continued investment by pharmaceutical majors and increased consumer spending.

The company sold its only plant and land in the previous year and invested 80% of the proceeds in debt funds and 20% in equity funds. It held about 500cr in liquid assets last year along with some real estate.

The company reported operating profits of about 3cr on revenues of 86cr in the last nine months of operations.

Since the plant was sold, the company has been subcontracting its work. The lack of tangible capital assets would appear to increase the necessity for the company to maintain or enhance its brand value from an investor’s perspective.

However, this brand value is under threat with the existence of spurious goods bearing the company’s brand name.

Moreover, the company faces significant competition from international and domestic companies entering the market and sourcing supplies from small/cottage scale fabricators. It is also adversely impacted by unrestricted imports and dumping of scientific and industrial products.

Furthermore, plastics can be substituted for glassware and poses a threat to the company’s revenues.

Since it is a net importer, it is exposed to a weakening INR.

Management have stated their intention to grow inorganically and the substantial pot of liquid assets is at risk of being dissipated. The investor would be exposed to the capital allocation expertise of management. This is true with most equity investments but more so when management intentions to deploy liquid funds are clear, and their expertise is untested.